Counterfeiting in the Primary Industry Sector and the Threat to New Zealand’s Economy

Authors: Ball, R. & Quirke, S.
Published in National Security Journal, Volume 1, Issue 1, October 2019

discovered to have procured cheaper quality milk powder, packed it into Beingmate labelled containers and sold the ‘Adulterated’ product at a higher price.71 In 2016, Beingmate reported a financial loss of NZ$158 million, and in 2018 Fonterra wrote off NZ$439 million from its initial NZ$750 million investment.72


Monitoring primary product integrity through the supply chain is complex, time consuming, difficult and expensive.73 It becomes increasingly problematic as product moves further away from the country of origin, however, brand reputation still remains significantly important for producers and regulators alike. The objective of this research has been to consider, and illustrate, how counterfeiting activity manifests itself in selected primary export sector industries in New Zealand.

Somewhat akin to corporate victims of cyber intrusions, thefts and hacks, there is reluctance by industry to provide detailed losses from counterfeiting. This may well be explained because some industries hold individual member companies responsible for investigating and resolving their own counterfeiting issues so are less inclined to divulge these details publicly, as much as the fact that no industry is aware of the full scale of the activity, or the impact, upon the sector.74 However, our analysis indicates that counterfeiting, by any definition, is impacting upon these industries, and although actual losses have not been disclosed by industry, the on-going risk to New Zealand’s reputation as an exporter of premium quality products remains. In 2019, export revenue from the five industries is expected to total NZ$22.9 billion, up from NZ$13.2 billion only three years earlier.75 International trends would also indicate that as New Zealand primary sector growth increases, counterfeiting in its numerous iterations, is also likely to increase.

The effect of counterfeiting activity in the primary product industry can have a detrimental impact at producer (economic), consumer (health), industry and state (reputation) levels – depending on the economic importance of the industry and the size of the state. For New Zealand, the potential impact of counterfeit-related failures within the industry could be catastrophic. Understandably, since the Sanlu melamine incident in 2008, New Zealand and international media regularly scan the primary industries export sector for similar instances of failure. The result has been further, and ongoing, public scrutiny of New Zealand’s primary industry by this country’s major trading partners. Our findings show that a simple typology identifies that counterfeiting affects all five primary sector case studies. Primary exporters, who did contribute to the research, are of the opinion that counterfeiting attempts of New Zealand primary products will only increase, with some fearing that the names of iconic goods produced here will in the future become synonymous with product targeted by organised crime. Exporters also agree that counterfeiting is a ‘critical threat’ to the New Zealand economy, yet it remains of significant concern that a sector earning 80% of New Zealand’s total merchandise export revenues, has no government or industry-coordinated policy or infrastructure to address this specific threat. This research has illustrated how counterfeiting can take place at any stage from manufacturing through the supply chain and into markets. Compliance and security systems require constant auditing. It is clear that overseas wholesale and retail markets are the intersecting points where counterfeit and genuine product merge. It is also at this point where the combination of mislabelled and stolen products presents the most serious health and safety risk to consumers, as well as reputational risk to producers. A simple counterfeiting typology will, we hope, assist in consolidating our understanding of the prevalence and risk from this activity and its impact on the New Zealand primary products industry.